I began analyzing the financial markets in 1982 when I became the research director for a financial advisory firm and provided regular market analysis on stocks, commodities, currencies and mutual funds. I am a technical analyst. Much of my focus was on how obscure technical indicators or methods, could be applied to the financial markets and used as an effective trading tool. Many of the indicators I have used for years, such as Gerry Appell's MACD and Welles Wilder's RSI, have subsequently gained wide popularity.

This page is devoted to sharing my insights and techniques in order to help you become a smarter trader/investor. Over the past twenty years I have traveled around the world several times, visiting all of the major financial centers as he taught professional traders and money managers my approach to the financial markets.

My method of stock selection starts with a proprietary scanning method to select a group of individual stocks for more extensive analysis. This includes an in-depth study of the volume patterns that I use to determine the strength of a stock's trend. Those with the strongest trend, either up or down, are then further analyzed to determine entry, exit and risk levels. I use Fibonacci retracement, projection and extension analysis to determine both profit objectives as well as stops.

Buffet Beater's Best Bets

Stocks put in another resilient performance Monday as they spent most of the day in negative territory, but were able to close higher, with the S&P 500 gaining 0.63%. The Dow Jones Transportation and S&P 600, which had been underperforming were stronger, up 0.90% and 0.91% respectively.

Monday’s action, when combined with last Friday’s impressive turnaround, does turn the focus back on the upside for the major averages but clearly the market is not as healthy internally as it was a few months ago. Only a few stocks made new highs so the yellow caution flags are still out. The futures are higher before the opening.

Still, it would not take much for the Dow Industrials or S&P 500 to surpass their recent highs. One of Monday’s strongest stocks was Icahn Enterprises LP (IEP), which was up over 10% after a bullish article in Barron’s. Its very attractive yield of 7.2% also helped.

Many might be surprised that IEP, according to Morningstar, was up an annualized 18.4% over the past ten years through last November 30. This was over 12 points better than Berkshire Hathaway (BRK-B) or the S&P 500.

Besides IEP, which is a master limited partnership, do other Icahn picks look attractive from a technical standpoint?

Click to Enlarge

Chart Analysis: Icahn Enterprises LP (IEP) has a market cap of $6.62 billion and hit a high of $90.75 in mid-February. Its second largest holding is Icahn Capital, Icahn’s hedge fund, which is now closed to outside investments.

IEP dropped below its 20-week EMA at $55.40 over the past two weeks before Monday’s surge as it closed at $61.30.

IEP is still below the quarterly pivot at $64.86 and a weekly close above this level will confirm that the correction is over.

There is further resistance now at $69.60-$74.15.

The relative performance moved through major resistance, line b, in early January.

The RS line has dropped down to the breakout level and is trying to turn up. It is still below its WMA.

The OBV broke its support, line c, in early March as there was one week where 2.4 million shares were traded.

The weekly OBV is still holding above its WMA and is well above the longer-term support at line c.

There is first resistance at last week’s high of $52.03 with the quarterly pivot at $52.06.

What it Means: Of the other holdings in Icahn Enterprises LP (IEP), many are too thin to invest in or are totally owned. Some of the holdings of his hedge fund, Icahn Capital, like Transocean Ltd. (RIG), are more liquid. Others like Herbalife Ltd. (HLF) are quite controversial as Icahn has had a well publicized dispute with fellow hedge fund manager Bill Ackerman. I try to avoid stocks that attract this type of attention.

I would not chase IEP but would look for a pullback after the Barron’s boost.

I also like American Railcar Industries (ARII) as the long-term trend in the transportation sector still looks positive. If Transocean Ltd. (RIG) retests last week’s support, it should provide a good entry point.

How to Profit: For Icahn Enterprises LP (IEP), go 50% long at $58.36 and 50% long at $56.34, with a stop at $53.81 (risk of approx 6.1%).

For American Railcar Industries (ARII), go 50% long at $39.29 and 50% long at $38.64, with a stop at $36.23 (risk of approx 7%).

For Transocean Ltd. (RIG), go 50% long at $49.54 and 50% long at $48.84, with a stop at $46.33 (risk of approx 5.8%).

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.